TY - JOUR
AU - Campbell,John Y.
AU - Mankiw,N. Gregory
TI - Are Output Fluctuations Transitory?
JF - National Bureau of Economic Research Working Paper Series
VL - No. 1916
PY - 1986
Y2 - May 1986
DO - 10.3386/w1916
UR - http://www.nber.org/papers/w1916
L1 - http://www.nber.org/papers/w1916.pdf
N1 - Author contact info:
John Y. Campbell
Morton L. and Carole S.
Olshan Professor of Economics
Department of Economics
Harvard University
Littauer Center 213
Cambridge, MA 02138
Tel: 617/496-6448
Fax: 617/495-7730
E-Mail: john_campbell@harvard.edu
N. Gregory Mankiw
Department of Economics
Littauer 223
Harvard University
Cambridge, MA 02138
Tel: 617/495-4301
Fax: 617/495-7730
E-Mail: ngmankiw@fas.harvard.edu
M2 - featured in NBER digest on 1986-10-01
AB - According to the conventional view of the business cycle, fluctuations in output represent temporary deviations from trend. The purpose of this paper is to question this conventional view. If fluctuations in output are dominated by temporary deviations from the natural rate of output, then an unexpected change in output today should not substantially change one's forecast of output in, say, ten or twenty years. Our examination of quarterly post-war United States data leads us to be skeptical about this implication. We find that a unexpected change in real GNP of one percent should change one's forecast by over one percent over a long horizon. While it is obviously imprudent to make definitive judgments regarding theories on the basis of one stylized fact alone, we believe that the great persistence of output shocks documented in this paper is an important and often neglected feature of the data that should more widely be used for evaluating theories of economic fluctuations.
ER -